IRS Dispute - HR Block errors - Amendments - Refund - Dues - Virginia

I own an S-corp (I am the only employee). My 2011 taxes were done by 2 different HR Block offices.

Business: Gross company income 84K, my wages 48K, K-1 for 16K and some expenses.

Personal: Accountant took gross income by company as my wages calculating taxes at 24K.

It was amended by biz office with taxes at 10.3K as they made another error. I moved to another city and the HRB accountant here made a 2nd amendment with corrections and I ended up paying another $3.8K in taxes. IRS came back asking for schedule C and I furnished that too. It was placed on hold for 3 times (9weeks each time) and when I filed my 2012 taxes, it resulted in refund of 6K. IRS simply applied my refund amount to the disputed...

[Please see comments for additional info as it maxed out on allowed text length...]

IRS sent me a letter on Mar 29 ("dated as April 8") saying they applied my refund towards dues and I still owe them 4.5K even though my case is on hold until April 15.
As per HRB's 2nd amendment, I paid all the taxes (10.3K + 3.8K) on 48K wages and 16K of K-1. IRS said I am reducing my income by 57% from my original return but they don't want to look into why it was done with amendments, letters, clarifications of errors, etc.
What is the purpose of having a company if I cannot claim genuine expenses? Who is going to pay for software, domains, hosting, marketing, etc? As per the original return, these expenses were paid by me as gross income was reported as my wages.
What are my options? I disputed the amount last year. Can I re-dispute it? Should I hire an accountant or an attorney?
What are my options against HR Block who is responsible for all this mess? Are they supposed to resolve the dispute that was placed on hold for 3 times in the last one year but they failed.
TIA

You should definitely go to a CPA who is experienced in tax matters and get this done! Having two different people doing your returns (one personal and one business) was your first mistake. I don't understand why you would have a schedule C if your business was run in your corporation. You do have the right to deduct your business expenses. You can keep disputing the IRS decision through 3 years after the due date of the original return. You may want to get to the Taxpayer Advocate. But, FIRST, go to an experienced, seasoned CPA firm and make sure that your tax returns are correct, once and for all. Then submit the final returns as amended returns and have the backup for all deductions ready to go for an examination.

Your first mistake was not going to a seasoned CPA in the first place.

Good luck.

Marty Davidoff, emd@taxattorneycpa.com, 732-274-1600. This answer is provided for general information only. You should seek advice from an attorney or tax professional.